Reflecting on ATO figures indicating that SMSFs invested $154.1 billion in cash and term deposits as at September 2013 – representing 29 per cent of all SMSF assets – Market Vectors managing director Arian Neiron said this allocation does not sufficiently mitigate inflation.
“SMSFs should consider diversifying their investments with ETFs in 2014 to build their wealth over time, rather than seeing the value of their cash eroded by tax and inflation,” Mr Neiron said.
“With interest rates falling to their lowest in years, and Australia’s inflation rate rising in recent times, the real returns on cash are falling. Australia’s inflation rate surprised the market in the final quarter of 2013, climbing to 2.7 per cent, up from 2.2 per cent in the December 2012 quarter.
The sharp fall in the Australian dollar is expected to keep upward pressure on inflation through 2014
“As well as term deposit investments, SMSFs have a wide range of listed investment options, such as ETFs, which can be used as a long-term growth strategy or to gain short- to medium-term equity market exposure while deciding where to put funds longer term.”
Having an SMSF does not mean you are 65 years of age.
40% of all SMSF Trustees are aged under 55 years of age, and around 40% of all new SMSF trustees are under 45 years of age.
It is crucial for Super fund members and SMSF trustees in their 30s and 40s to get their asset allocation right today, in order to reach their retirement goals in 20-30 years.
So the advice to Mrs Smith, aged 64yo & totally adverse to risk, is to invest in ETF Market Vectors?
Cannot comment on adequate diversification as per section 52 of SIS Act based on these ATO figures. Why? Well perhaps SMSF members are adequately diversified out of super & hence have cash sitting in their fund in alignment with their risk profile & total assets.